France Luxury Real Estate Taxation.
A. Case where the property is occupied by its owner
When luxury buildings in France (private mansions, luxury apartments, luxury chalets, luxury villas, old mansions, mansions …) are occupied by their owners, the tax regime to which they are subject, is governed by the same laws as for ordinary French real estate. The landlord will pay the property tax and the residential tax.
These taxes are based on the rental value of the building, as for all living quarters. The collection of these two taxes is shared between the State and local and regional authorities (communes, départements and regions).
B. Case where is property is leased
In practice, rental revenues from prestigious properties are taxable to the real estate tax regime. This income is obtained by subtracting the expenses paid in the year by the owner from the rents collected during the same period.
The deductible expenses correspond to the following expenses: maintenance and improvement work, insurance, property tax, interest on borrowing …
When this calculation shows a real estate benefit, it adds to the total income of the owner and is therefore subject to the progressive personal income tax (IRPP) scale. It will also support social levies such as the CSG and the CRDS. On the other hand, if the result of the calculation shows a property deficit, the portion of this deficit arising from the borrowing interest is charged to the property income of the following ten years. The excess deficit is deductible from the total income within the limit of € 10,700 per year, with any balance deducted from income for the following ten years.
Tax exemption opportunities :
The Malraux Law :
For the prestigious buildings that can benefit from it, the Malraux law is very more interesting. This special scheme for tax exemption in real estate gives the right to a tax reduction corresponding to 30% of the work done on buildings located in a protected sector and 22% of the work carried out on the same type of residential property, but Located in an Urban or Landscape Architectural Heritage Protection Zone (ZPPAUP). The annual amount of work that can be used to calculate the Malraux tax reduction is capped at € 100,000 per year. The unallocated tax credit for the year can not be carried forward. The Malraux law ensures the profitability of a high-quality real estate investment.
The law on Historic Monuments :
Buildings classified as historic monuments, buildings listed in the supplementary inventory (ISMH) and buildings bearing the label issued by the Heritage Foundation may also benefit from a very advantageous regime of tax exemption. The entire work is deductible from the taxable income of the taxpayer, although the allocation to the total income will vary according to several criteria such as:
– the realization of profits or not,
– occupation or not by the owner or his family.
In some cases, the tax benefit may be extended to inheritance and donation taxes. In return, the obligations required for the owner of the building are few. An owner who is not a corporation or holds the property under a condominium must undertake to keep the property for at least fifteen years from the date of its acquisition.
Cabinet Roche & Cie, Chartered Accountant in Lyon
Specialist in Luxury Real-Estate Taxation in France and Non-Résidents.